##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: December 29, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-03905
 TRANSCAT, INC.
  Ohio
    
    16-0874418(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 35 Vantage Point Drive, Rochester, New York 14624
 (585) 352-7777
 þ o
  o o þ o
  o þ




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##### 



Page(s)PART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements:Consolidated Statements of Operations and Comprehensive Income for the Third Quarter
and Nine Months Ended December 29, 2007 and December 23, 2006
    
    
    3Consolidated Balance Sheets as of December 29, 2007 and March 31, 2007
    
    
    4Consolidated Statements of Cash Flows for the Nine Months Ended December 29, 2007
and December 23, 2006
    
    
    5Consolidated Statements of Shareholders Equity for the Nine Months Ended
December 29, 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7-11Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12-22Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23PART II. OTHER INFORMATIONItem 6. Exhibits
    
    
    23SIGNATURES
    
    
    24INDEX TO EXHIBITS
    
    
    25EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 TRANSCAT, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
  (Unaudited)
    
    
    (Unaudited)Third Quarter Ended
    
    
    Nine Months EndedDecember 29,
    
    
    December 23,
    
    
    December 29,
    
    
    December 23,2007
    
    
    2006
    
    
    2007
    
    
    2006Product Sales
    
    $
    13,005
    
    
    $
    12,296
    
    
    $
    35,151
    
    
    $
    32,713Service Sales
    
    
    5,435
    
    
    
    4,944
    
    
    
    16,104
    
    
    
    14,907Net Sales
    
    
    18,440
    
    
    
    17,240
    
    
    
    51,255
    
    
    
    47,620Cost of Products Sold
    
    
    9,351
    
    
    
    8,927
    
    
    
    25,306
    
    
    
    24,177Cost of Services Sold
    
    
    4,376
    
    
    
    4,015
    
    
    
    12,763
    
    
    
    11,792Total Cost of Products
and Services Sold
    
    
    13,727
    
    
    
    12,942
    
    
    
    38,069
    
    
    
    35,969Gross Profit
    
    
    4,713
    
    
    
    4,298
    
    
    
    13,186
    
    
    
    11,651Selling, Marketing and Warehouse Expenses
    
    
    2,304
    
    
    
    2,230
    
    
    
    6,627
    
    
    
    6,337Administrative Expenses
    
    
    1,365
    
    
    
    1,315
    
    
    
    4,472
    
    
    
    3,705Total Operating Expenses
    
    
    3,669
    
    
    
    3,545
    
    
    
    11,099
    
    
    
    10,042Gain on TPG Divestiture
    
    
    
    
    
    
    1,544
    
    
    
    
    
    
    
    1,544Operating Income
    
    
    1,044
    
    
    
    2,297
    
    
    
    2,087
    
    
    
    3,153Interest Expense
    
    
    17
    
    
    
    84
    
    
    
    80
    
    
    
    268Other Expense, net
    
    
    135
    
    
    
    145
    
    
    
    425
    
    
    
    265Total Other Expense
    
    
    152
    
    
    
    229
    
    
    
    505
    
    
    
    533Income Before Income Taxes
    
    
    892
    
    
    
    2,068
    
    
    
    1,582
    
    
    
    2,620(Benefit From) Provision for Income Taxes
    
    
    (316
    )
    
    
    861
    
    
    
    (58
    )
    
    
    1,050Net Income
    
    
    1,208
    
    
    
    1,207
    
    
    
    1,640
    
    
    
    1,570Other Comprehensive (Loss) Income
    
    
    (19
    )
    
    
    (239
    )
    
    
    438
    
    
    
    (145
    )Comprehensive Income
    
    $
    1,189
    
    
    $
    968
    
    
    $
    2,078
    
    
    $
    1,425Basic Earnings Per Share
    
    $
    0.17
    
    
    $
    0.17
    
    
    $
    0.23
    
    
    $
    0.23Average Shares Outstanding
    
    
    7,162
    
    
    
    6,938
    
    
    
    7,119
    
    
    
    6,919Diluted Earnings Per Share
    
    $
    0.17
    
    
    $
    0.16
    
    
    $
    0.23
    
    
    $
    0.21Average Shares Outstanding
    
    
    7,314
    
    
    
    7,428
    
    
    
    7,266
    
    
    
    7,415
  3




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TRANSCAT, INC.
 
 CONSOLIDATED BALANCE SHEETS
  (Unaudited)December 29,
    
    
    March 31,2007
    
    
    2007ASSETSCurrent Assets:Cash
    
    $
    302
    
    
    $
    357Accounts Receivable, less allowance for doubtful accounts of $77 and
$47 as of December 29, 2007 and March 31, 2007, respectively
    
    
    8,271
    
    
    
    8,846Other Receivables
    
    
    878
    
    
    
    352Inventory, net
    
    
    5,611
    
    
    
    4,336Prepaid Expenses and Other Current Assets
    
    
    1,150
    
    
    
    762Deferred Tax Asset
    
    
    420
    
    
    
    851Total Current Assets
    
    
    16,632
    
    
    
    15,504Property and Equipment, net
    
    
    3,344
    
    
    
    2,814Goodwill
    
    
    2,967
    
    
    
    2,967Deferred Tax Asset
    
    
    1,552
    
    
    
    791Other Assets
    
    
    348
    
    
    
    346Total Assets
    
    $
    24,843
    
    
    $
    22,422LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts Payable
    
    $
    6,709
    
    
    $
    5,307Accrued Compensation and Other Liabilities
    
    
    2,258
    
    
    
    2,578Income Taxes Payable
    
    
    97
    
    
    
    42Total Current Liabilities
    
    
    9,064
    
    
    
    7,927Long-Term Debt
    
    
    1,263
    
    
    
    2,900Other Liabilities
    
    
    389
    
    
    
    366Total Liabilities
    
    
    10,716
    
    
    
    11,193Shareholders Equity:Common Stock, par value $0.50 per share, 30,000,000 shares authorized;
7,430,475 and 7,286,119 shares issued as of December 29, 2007 and
March 31, 2007, respectively; 7,154,693 and 7,010,337 shares
outstanding as of December 29, 2007 and March 31, 2007,
respectively
    
    
    3,715
    
    
    
    3,643Capital in Excess of Par Value
    
    
    6,345
    
    
    
    5,268Warrants
    
    
    
    
    
    
    329Accumulated Other Comprehensive Income
    
    
    481
    
    
    
    43Retained Earnings
    
    
    4,574
    
    
    
    2,934Less: Treasury Stock, at cost, 275,782 shares as of
December 29, 2007 and March 31, 2007
    
    
    (988
    )
    
    
    (988
    )Total Shareholders Equity
    
    
    14,127
    
    
    
    11,229Total Liabilities and Shareholders Equity
    
    $
    24,843
    
    
    $
    22,422
  4




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TRANSCAT, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  (Unaudited)Nine Months EndedDecember 29,
    
    
    December 23,2007
    
    
    2006Cash Flows from Operating Activities:Net Income
    
    $
    1,640
    
    
    $
    1,570Adjustments to Reconcile Net Income to Net Cash Provided byOperating Activities:Deferred Income Taxes
    
    
    (333
    )
    
    
    975Depreciation and Amortization
    
    
    1,290
    
    
    
    1,226Provision for Accounts Receivable and Inventory Reserves
    
    
    (48
    )
    
    
    106Stock-Based Compensation Expense
    
    
    601
    
    
    
    387Gain on TPG Divestiture
    
    
    
    
    
    
    (1,544
    )Changes in Assets and Liabilities:Accounts Receivable and Other Receivables
    
    
    409
    
    
    
    (537
    )Inventory
    
    
    (1,200
    )
    
    
    (245
    )Prepaid Expenses and Other Assets
    
    
    (859
    )
    
    
    (721
    )Accounts Payable
    
    
    1,402
    
    
    
    198Accrued Compensation and Other Liabilities
    
    
    (287
    )
    
    
    (777
    )Income Taxes Payable
    
    
    55
    
    
    
    (102
    )Net Cash Provided by Operating Activities
    
    
    2,670
    
    
    
    536Cash Flows from Investing Activities:Purchase of Property and Equipment
    
    
    (1,351
    )
    
    
    (709
    )Net Cash Used in Investing Activities
    
    
    (1,351
    )
    
    
    (709
    )Cash Flows from Financing Activities:Chase Revolving Line of Credit, net
    
    
    (1,637
    )
    
    
    4,359GMAC Revolving Line of Credit, net
    
    
    
    
    
    
    (3,252
    )Payments on Other Debt Obligations
    
    
    
    
    
    
    (1,073
    )Issuance of Common Stock
    
    
    219
    
    
    
    161Net Cash (Used in) Provided by Financing Activities
    
    
    (1,418
    )
    
    
    195Effect of Exchange Rate Changes on Cash
    
    
    44
    
    
    
    1Net (Decrease) Increase in Cash
    
    
    (55
    )
    
    
    23Cash at Beginning of Period
    
    
    357
    
    
    
    115Cash at End of Period
    
    $
    302
    
    
    $
    138Supplemental Disclosures of Cash Flow Activity:Cash paid during the period for:Interest
    
    $
    90
    
    
    $
    278Income Taxes, net
    
    $
    264
    
    
    $
    177Supplemental Disclosure of Non-Cash Financing Activity:Treasury Stock Acquired in Cashless Exercise of Stock Options
    
    $
    
    
    
    $
    50
  5




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TRANSCAT, INC.
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
   Accum-Capital
    
    
    
    
    
    
    ulatedCommon Stock
    
    
    In
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Treasury StockIssued
    
    
    Excess
    
    
    
    
    
    
    Compre-
    
    
    
    
    
    
    Outstanding$0.50 Par Value
    
    
    of Par
    
    
    War-
    
    
    hensive
    
    
    Retained
    
    
    at CostShares
    
    
    Amount
    
    
    Value
    
    
    rants
    
    
    Income
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance as of March 31, 2007
    
    
    7,286
    
    
    $
    3,643
    
    
    $
    5,268
    
    
    $
    329
    
    
    $
    43
    
    
    $
    2,934
    
    
    
    276
    
    
    $
    (988
    )
    
    $
    11,229Issuance of Common Stock
    
    
    114
    
    
    
    57
    
    
    
    162
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219Stock-Based Compensation
    
    
    30
    
    
    
    15
    
    
    
    586
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    601Expired Warrants
    
    
    
    
    
    
    
    
    
    
    329
    
    
    
    (329
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive Income:Currency Translation
Adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    431
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    431Unrecognized Prior
Service
Cost, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,640
    
    
    
    
    
    
    
    
    
    
    
    1,640Balance as of December 29, 2007
    
    
    7,430
    
    
    $
    3,715
    
    
    $
    6,345
    
    
    $
    
    
    
    $
    481
    
    
    $
    4,574
    
    
    
    276
    
    
    $
    (988
    )
    
    $
    14,127
  6




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TRANSCAT, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 1  GENERAL
 Description of Business:
 Basis of Presentation:
 Reclassification of Amounts:
 Stock-Based Compensation:
   Expected life
    
    6 yearsAnnualized volatility rate
    
    
    70.8
    %Risk-free rate of return
    
    
    4.6
    %Dividend rate
    
    
    0.0
    %
  Gain on TPG Divestiture:
 7




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##### Table of Contents



Foreign Currency Translation and Transactions:
  Earnings Per Share:
  Third Quarter Ended
    
    
    Nine Months EndedDecember 29,
    
    
    December 23,
    
    
    December 29,
    
    
    December 23,2007
    
    
    2006
    
    
    2007
    
    
    2006Shares Outstanding:Dilutive
    
    
    152
    
    
    
    490
    
    
    
    147
    
    
    
    496Anti-dilutive
    
    
    612
    
    
    
    388
    
    
    
    618
    
    
    
    382Total
    
    
    764
    
    
    
    878
    
    
    
    765
    
    
    
    878Range of Exercise Prices per
Share:Options
    
    $
    2.20-$7.72
    
    
    $
    0.80-$5.80
    
    
    $
    2.20-$7.72
    
    
    $
    0.80-$5.80Warrants
    
    $
    2.31-$5.80
    
    
    $
    0.97-$5.80
    
    
    $
    2.31-$5.80
    
    
    $
    0.97-$5.80
 Recently Issued Accounting Pronouncements:
  8




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##### Table of Contents



NOTE 2  DEBT
 Description.
 Interest and Commitment Fees. 1 2
 Covenants.
 Other Terms.
 NOTE 3  INCOME TAXES
        9




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NOTE 4  STOCK-BASED COMPENSATION
 Stock
Options:
  Weighted
    
    
    Weighted AverageNumber
    
    
    Average
    
    
    Remaining
    
    
    AggregateOf
    
    
    Price Per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term (in years)
    
    
    ValueOutstanding as of March 31, 2007
    
    
    329
    
    
    $
    3.11Granted
    
    
    391
    
    
    
    6.94Exercised
    
    
    (59
    )
    
    
    1.15Cancelled/Forfeited
    
    
    (4
    )
    
    
    1.45Outstanding as of December 29, 2007
    
    
    657
    
    
    
    5.57
    
    
    
    9
    
    
    $
    1,141Exercisable as of December 29, 2007
    
    
    209
    
    
    
    3.10
    
    
    
    7
    
    
    
    827
   Warrants:
  Weighted
    
    
    Weighted AverageNumber
    
    
    Average
    
    
    Remaining
    
    
    AggregateOf
    
    
    Price Per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term (in years)
    
    
    ValueOutstanding as of March 31, 2007
    
    
    153
    
    
    $
    3.27Granted
    
    
    
    
    
    
    Exercised
    
    
    (43
    )
    
    
    1.81Cancelled/Forfeited
    
    
    (3
    )
    
    
    5.10Outstanding as of December 29, 2007
    
    
    107
    
    
    
    3.81
    
    
    
    2
    
    
    $
    347Exercisable as of December 29, 2007
    
    
    81
    
    
    
    3.38
    
    
    
    2
    
    
    
    296
  10




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NOTE 5  SEGMENT INFORMATION
  Third Quarter Ended
    
    
    Nine Months EndedDecember 29,
    
    
    December 23,
    
    
    December 29,
    
    
    December 23,2007
    
    
    2006
    
    
    2007
    
    
    2006Net Sales:Product
    
    $
    13,005
    
    
    $
    12,296
    
    
    $
    35,151
    
    
    $
    32,713Service
    
    
    5,435
    
    
    
    4,944
    
    
    
    16,104
    
    
    
    14,907Total
    
    
    18,440
    
    
    
    17,240
    
    
    
    51,255
    
    
    
    47,620Gross Profit:Product
    
    
    3,654
    
    
    
    3,369
    
    
    
    9,845
    
    
    
    8,536Service
    
    
    1,059
    
    
    
    929
    
    
    
    3,341
    
    
    
    3,115Total
    
    
    4,713
    
    
    
    4,298
    
    
    
    13,186
    
    
    
    11,651Operating Expenses:Product
    
    
    2,316
    
    
    
    2,216
    
    
    
    6,896
    
    
    
    6,186Service
    
    
    1,353
    
    
    
    1,329
    
    
    
    4,203
    
    
    
    3,856Total
    
    
    3,669
    
    
    
    3,545
    
    
    
    11,099
    
    
    
    10,042Operating Income (Loss):Product
    
    
    1,338
    
    
    
    1,153
    
    
    
    2,949
    
    
    
    2,350Service
    
    
    (294
    )
    
    
    (400
    )
    
    
    (862
    )
    
    
    (741
    )Gain on TPG Divestiture
    
    
    
    
    
    
    1,544
    
    
    
    
    
    
    
    1,544Total
    
    
    1,044
    
    
    
    2,297
    
    
    
    2,087
    
    
    
    3,153Unallocated Amounts:Other Expense
    
    
    152
    
    
    
    229
    
    
    
    505
    
    
    
    533(Benefit
from) Provision for Income Taxes
    
    
    (316
    )
    
    
    861
    
    
    
    (58
    )
    
    
    1,050Total
    
    
    (164
    )
    
    
    1,090
    
    
    
    447
    
    
    
    1,583Net Income
    
    $
    1,208
    
    
    $
    1,207
    
    
    $
    1,640
    
    
    $
    1,570
 11




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements.
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 Accounts Receivable:
 Stock-Based Compensation:
  Revenue Recognition:
 Reclassification of Amounts:
 12




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RESULTS OF OPERATIONS
  (Unaudited)
    
    (Unaudited)Quarter Ended
    
    Nine Months EndedDecember 29,
    
    December 23,
    
    December 29,
    
    December 23,2007
    
    2006
    
    2007
    
    2006As a Percentage of Net Sales:Product Sales
    
    
    70.5
    %
    
    
    71.3
    %
    
    
    68.6
    %
    
    
    68.7
    %Service Sales
    
    
    29.5
    %
    
    
    28.7
    %
    
    
    31.4
    %
    
    
    31.3
    %Net Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Product Gross Profit
    
    
    28.1
    %
    
    
    27.4
    %
    
    
    28.0
    %
    
    
    26.1
    %Service Gross Profit
    
    
    19.5
    %
    
    
    18.8
    %
    
    
    20.7
    %
    
    
    20.9
    %Total Gross Profit
    
    
    25.6
    %
    
    
    24.9
    %
    
    
    25.7
    %
    
    
    24.5
    %Selling, Marketing and Warehouse Expenses
    
    
    12.5
    %
    
    
    13.0
    %
    
    
    12.9
    %
    
    
    13.3
    %Administrative Expenses
    
    
    7.4
    %
    
    
    7.6
    %
    
    
    8.7
    %
    
    
    7.8
    %Total Operating Expenses
    
    
    19.9
    %
    
    
    20.6
    %
    
    
    21.6
    %
    
    
    21.1
    %Gain on TPG Divestiture
    
    
    
    
    
    
    9.0
    %
    
    
    
    
    
    
    3.2
    %Operating Income
    
    
    5.7
    %
    
    
    13.4
    %
    
    
    4.1
    %
    
    
    6.6
    %Interest Expense
    
    
    0.1
    %
    
    
    0.5
    %
    
    
    0.2
    %
    
    
    0.6
    %Other Expense, net
    
    
    0.7
    %
    
    
    0.8
    %
    
    
    0.8
    %
    
    
    0.6
    %Total Other Expense
    
    
    0.8
    %
    
    
    1.3
    %
    
    
    1.0
    %
    
    
    1.2
    %Income Before Income Taxes
    
    
    4.9
    %
    
    
    12.1
    %
    
    
    3.1
    %
    
    
    5.4
    %(Benefit From) Provision for Income Taxes
    
    
    (1.7
    )%
    
    
    5.0
    %
    
    
    (0.1
    )%
    
    
    2.2
    %Net Income
    
    
    6.6
    %
    
    
    7.1
    %
    
    
    3.2
    %
    
    
    3.2
    %
 13




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##### Table of Contents



THIRD QUARTER ENDED DECEMBER 29, 2007 COMPARED TO THIRD QUARTER ENDED DECEMBER 23, 2006 
(dollars in
thousands):
 Sales:
 Third Quarter EndedDecember 29,
    
    
    December 23,2007
    
    
    2006Net Sales:Product
    
    $
    13,005
    
    
    $
    12,296Service
    
    
    5,435
    
    
    
    4,944Total
    
    $
    18,440
    
    
    $
    17,240
   FY 2008
    
    
    FY 2007Q3
    
    Q2
    
    Q1
    
    
    Q4 (1)
    
    Q3
    
    Q2
    
    Q1Product Sales Growth
    
    
    5.8
    %
    
    
    13.6
    %
    
    
    3.7
    %
    
    
    
    20.7
    %
    
    
    6.9
    %
    
    
    5.0
    %
    
    
    12.3
    %
 
 (1)
    
    Represents a 14-week period. All other quarters are 13-week periods.  FY 2008 Third Quarter
    
    
    FY 2007 Third QuarterPercent of
    
    Gross
    
    
    Percent of
    
    GrossNet Sales
    
    Profit % (1)
    
    
    Net Sales
    
    Profit % (1)Direct
    
    
    86
    %
    
    
    26.2
    %
    
    
    
    85
    %
    
    
    25.8
    %Reseller
    
    
    13
    %
    
    
    17.7
    %
    
    
    
    14
    %
    
    
    13.7
    %Freight Billed to Customers
    
    
    1
    %
    
    
    
    
    
    
    
    1
    %Total
    
    
    100
    %
    
    
    
    
    
    
    
    100
    %
 
 (1)
    
    Calculated as net sales less purchase costs divided by net sales. 14




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##### Table of Contents



FY 2008
    
    
    FY 2007Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Total Unshippable Orders
    
    $
    1,411
    
    
    $
    1,689
    
    
    $
    1,678
    
    
    
    $
    1,814
    
    
    $
    2,100
    
    
    $
    2,125
    
    
    $
    1,404% of Unshippable Orders that
Are Backorders
    
    
    78.1
    %
    
    
    74.1
    %
    
    
    81.0
    %
    
    
    
    89.5
    %
    
    
    92.2
    %
    
    
    89.7
    %
    
    
    80.2
    %
  FY 2008
    
    
    FY 2007Q3
    
    Q2
    
    Q1
    
    
    Q4 (1)
    
    Q3
    
    Q2
    
    Q1Service Sales Growth
    
    
    9.9
    %
    
    
    8.6
    %
    
    
    5.6
    %
    
    
    
    11.2
    %
    
    
    4.5
    %
    
    
    5.8
    %
    
    
    6.5
    %
 
 (1)
    
    Represents a 14-week period. All other quarters are 13-week periods. Gross Profit:
 Third Quarter EndedDecember 29,
    
    
    December 23,2007
    
    
    2006Gross Profit:Product
    
    $
    3,654
    
    
    $
    3,369Service
    
    
    1,059
    
    
    
    929Total
    
    $
    4,713
    
    
    $
    4,298
   15




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##### Table of Contents



FY 2008
    
    
    FY 2007Q3
    
    Q2
    
    Q1
    
    
    Q4
    
    Q3
    
    Q2
    
    Q1Product Gross Profit % (1)
    
    
    25.1
    %
    
    
    25.8
    %
    
    
    24.6
    %
    
    
    
    24.4
    %
    
    
    24.0
    %
    
    
    23.7
    %
    
    
    22.4
    %Other Income % (2)
    
    
    3.0
    %
    
    
    2.1
    %
    
    
    3.4
    %
    
    
    
    2.8
    %
    
    
    3.4
    %
    
    
    1.2
    %
    
    
    3.3
    %Product Gross Profit %
    
    
    28.1
    %
    
    
    27.9
    %
    
    
    28.0
    %
    
    
    
    27.2
    %
    
    
    27.4
    %
    
    
    24.9
    %
    
    
    25.7
    %
 
 (1)
    
    Calculated as net sales less purchase costs divided by net sales.(2)
    
    Includes vendor rebates, cooperative advertising income, freight billed to customers, freight expenses, and direct shipping costs.  FY 2008
    
    
    FY 2007Q3
    
    Q2
    
    Q1
    
    
    Q4 (1)
    
    Q3
    
    Q2
    
    Q1Service
Gross Profit Dollar Growth
    
    
    14.0
    %
    
    
    5.0
    %
    
    
    3.8
    %
    
    
    
    (5.8
    )%
    
    
    (12.3
    )%
    
    
    (17.2
    )%
    
    
    (16.6
    )%
 
 (1)
    
    Represents a 14-week period. All other quarters are 13-week periods. Operating Expenses:
 Third Quarter EndedDecember 29,
    
    
    December 23,2007
    
    
    2006Operating Expenses:Selling, Marketing and Warehouse
    
    $
    2,304
    
    
    $
    2,230Administrative
    
    
    1,365
    
    
    
    1,315Total
    
    $
    3,669
    
    
    $
    3,545
  Gain on TPG Divestiture:
 Third Quarter EndedDecember 29,
    
    December 23,2007
    
    2006Gain on TPG Divestiture
    
    $
    
    
    
    $
    1,544
  16




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##### Table of Contents



Other Expense:
 Third Quarter EndedDecember 29,
    
    
    December 23,2007
    
    
    2006Other Expense:Interest Expense
    
    $
    17
    
    
    $
    84Other Expense, net
    
    
    135
    
    
    
    145Total
    
    $
    152
    
    
    $
    229
  Taxes:
 Third Quarter EndedDecember 29,
    
    December 23,2007
    
    2006(Benefit from) Provision for Income Taxes
    
    $
    (316
    )
    
    $
    861
  17




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##### Table of Contents



NINE MONTHS ENDED DECEMBER 29, 2007 COMPARED TO NINE MONTHS ENDED DECEMBER 23, 2006 
(dollars in
thousands):
 Sales:
 Nine Months EndedDecember 29,
    
    
    December 23,2007
    
    
    2006Net Sales:Product
    
    $
    35,151
    
    
    $
    32,713Service
    
    
    16,104
    
    
    
    14,907Total
    
    $
    51,255
    
    
    $
    47,620
    Nine Months Ended
    
    
    Nine Months EndedDecember 29, 2007
    
    
    December 23, 2006Percent of
    
    Gross
    
    
    Percent of
    
    GrossNet Sales
    
    Profit % (1)
    
    
    Net Sales
    
    Profit % (1)Direct
    
    
    85
    %
    
    
    26.5
    %
    
    
    
    83
    %
    
    
    25.4
    %Reseller
    
    
    14
    %
    
    
    17.2
    %
    
    
    
    16
    %
    
    
    12.9
    %Freight Billed to Customers
    
    
    1
    %
    
    
    
    
    
    
    
    1
    %Total
    
    
    100
    %
    
    
    
    
    
    
    
    100
    %
 
 (1)
    
    Calculated at net sales less purchase costs divided by net sales.  18




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##### Table of Contents



Gross
Profit:
 Nine Months EndedDecember 29,
    
    
    December 23,2007
    
    
    2006Gross Profit:Product
    
    $
    9,845
    
    
    $
    8,536Service
    
    
    3,341
    
    
    
    3,115Total
    
    $
    13,186
    
    
    $
    11,651
    Operating Expenses:
 Nine Months EndedDecember 29,
    
    
    December 23,2007
    
    
    2006Operating Expenses:Selling, Marketing and Warehouse
    
    $
    6,627
    
    
    $
    6,337Administrative
    
    
    4,472
    
    
    
    3,705Total
    
    $
    11,099
    
    
    $
    10,042
  Other Expense:
 Nine Months EndedDecember 29,
    
    
    December 23,2007
    
    
    2006Other Expense:Interest Expense
    
    $
    80
    
    
    $
    268Other Expense
    
    
    425
    
    
    
    265Total
    
    $
    505
    
    
    $
    533
  19




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##### Table of Contents



Gain on TPG Divestiture:
 Nine Months EndedDecember 29,
    
    December 23,2007
    
    2006Gain on TPG Divestiture
    
    $
    
    
    
    $
    1,544
  Taxes:
 Nine Months EndedDecember 29,
    
    December 23,2007
    
    2006(Benefit from) Provision for Income Taxes
    
    $
    (58
    )
    
    $
    1,050
  20




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows.
 Nine Months EndedDecember 29,
    
    December 23,2007
    
    2006Cash Provided by (Used in):Operating Activities
    
    $
    2,670
    
    
    $
    536Investing Activities
    
    
    (1,351
    )
    
    
    (709
    )Financing Activities
    
    
    (1,418
    )
    
    
    195
  
    
    Inventory/Accounts Payable: Our inventory of $5.6 million on December 29, 2007 is
$1.3 million higher than our fiscal year-end inventory on March 31, 2007 of $4.3
million and $1.5 million higher than our inventory level on December 23, 2006 of $4.1
million. The increase is primarily due to $1.1 million in inventory related to
shipments from vendors during the last week of the third quarter of fiscal year 2008 in
anticipation of strong sales in our fiscal fourth quarter, as well as to increase the
immediate availability of high demand products. Our $2.3 million increase in accounts
payable is primarily the result of the timing of payments and inventory receipts in the
last month of our third quarter of fiscal year 2008, including the aforementioned $1.1
million of vendor shipments in the final week of the third quarter of fiscal year
2008.
 December 29,
    
    December 23,2007
    
    2006Accounts Payable
    
    $
    6,709
    
    
    $
    4,417Inventory, net
    
    $
    5,611
    
    
    $
    4,145Accounts Payable/Inventory Ratio
    
    
    1.20
    
    
    
    1.07
 
    
    Receivables: The increase in our accounts receivable at December 29, 2007 compared
to December 23, 2006 is primarily due to sales growth in our third quarter of fiscal
year 2008. We have continued to maintain strong collections on our accounts
receivable, reflected in our days sales outstanding.
 December 29,
    
    December 23,2007
    
    2006Net Sales, for the last two fiscal months
    
    $
    13,055
    
    
    $
    12,089Accounts Receivable, net
    
    $
    8,271
    
    
    $
    7,863Days Sales Outstanding (based on 60 days)
    
    
    38
    
    
    
    39
   December 29,
    
    
    December 23,2007
    
    
    2006Total Debt
    
    $
    1,263
    
    
    $
    4,359
 21




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Debt.
   OUTLOOK
   22




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 INTEREST RATES
   FOREIGN CURRENCY
   
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Controls over Financial Reporting.
 
 PART II. OTHER INFORMATION
 
 ITEM 6. EXHIBITS
  23




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##### Table of Contents



SIGNATURES
  TRANSCAT, INC.Date:  February 11, 2008
    /s/ Charles P. HaddedCharles P. HadeedChief Executive Officer, President and Chief Operating OfficerDate:  February 11, 2008
    /s/ John J. ZimmerJohn J. ZimmerVice President of Finance and Chief Financial Officer 24




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##### Table of Contents



INDEX TO EXHIBITS
 (31)
    
    Rule 13a-14(a)/15d-14(a) Certifications
 31.1
    
    Certification of Chief Executive Officer31.2
    
    Certification of Chief Financial Officer
 (32)
    
    Section 1350 Certifications
 32.1
    
    Section 1350 Certifications
 25